Introduction
Sub-agency in real estate refers to a relationship where a real estate agent or broker represents a client as a sub-agent of another agent or broker. In this arrangement, the sub-agent owes fiduciary duties to the client of the primary agent, rather than directly to the client themselves. This concept can be complex, so let’s dive deeper into understanding sub-agency in real estate.
Understanding Sub-Agency
In a traditional real estate transaction, there are typically two parties involved: the buyer and the seller. Each party may be represented by their own real estate agent or broker. However, in some cases, the buyer’s agent or broker may act as a sub-agent of the seller’s agent or broker. This means that the buyer’s agent owes fiduciary duties to the seller, even though they are representing the buyer.
Fiduciary Duties: Fiduciary duties are legal obligations that an agent owes to their client. These duties include loyalty, confidentiality, disclosure, obedience, and reasonable care. When a sub-agency relationship exists, the sub-agent owes these duties to the client of the primary agent, rather than directly to the client themselves.
How Sub-Agency Works
Sub-agency typically arises in situations where a buyer’s agent is showing a property listed by another agent or brokerage. When the buyer’s agent shows the property, they become a sub-agent of the listing agent or brokerage. This means that they owe fiduciary duties to the seller, even though they are working on behalf of the buyer.
Example: Let’s say Agent A is the listing agent for a property, and Agent B is the buyer’s agent. Agent B brings their client, the buyer, to view the property. In this scenario, Agent B becomes a sub-agent of Agent A, and owes fiduciary duties to the seller.
It’s important to note that sub-agency can vary by jurisdiction and may not be permitted in some areas. In some cases, the concept of sub-agency has been largely replaced by alternative agency relationships, such as designated agency or dual agency.
Advantages and Disadvantages of Sub-Agency
Advantages: Sub-agency can provide benefits for both the buyer and the seller. For the buyer, it allows their agent to have access to a wider range of properties, even those listed by other agents or brokerages. For the seller, sub-agency can increase the exposure of their property to potential buyers.
Disadvantages: However, sub-agency can also present challenges and potential conflicts of interest. The sub-agent owes fiduciary duties to the seller, which may conflict with the buyer’s best interests. This can create a situation where the sub-agent cannot fully advocate for the buyer’s needs and preferences.
Conclusion
Sub-agency in real estate is a relationship where a buyer’s agent or broker becomes a sub-agent of the seller’s agent or broker. In this arrangement, the sub-agent owes fiduciary duties to the seller, even though they are representing the buyer. While sub-agency can have advantages in terms of access to a wider range of properties, it also presents potential conflicts of interest. It’s important for both buyers and sellers to understand the implications of sub-agency when engaging in a real estate transaction.
References
– National Association of Realtors: nar.realtor
– Investopedia: investopedia.com
